Is Increasing the Federal Minimum Wage a Good Idea?

The federal minimum wage in the United States is set to increase tomorrow (July 24) from $5.85 an hour to $6.55; this is a 12% jump. I’m all for paying workers a decent wage; there is a moral obligation to do so. But I can’t say I’m in favor of a minimum wage. It has been argued that minimum wage laws have the side effect of reducing the number of entry-level jobs, thereby most hurting those who it was designed to help.

My personal experience supports that. When I was 18 — which was more than a few years ago — I was desperate for a summer job. I made the rounds, but found little interest. Finally, I found a local fast food outlet that was hiring. The interview was going well until I was asked my age. At 18 they would be required to pay me minimum wage, but if I were 16 or 17, they could pay less. They were looking for low cost labor and the minimum wage laws removed me from consideration. I was completely willing to work for less — after all, any job was better than no job — but the government removed that option from me.

What is interesting is that 23 States will still be higher than the federal minimum of $6.55. Michigan is one of them, with a minimum wage of $7.40.

Perhaps connected, Michigan’s unemployment rate has been the highest in the nation for the past two years. Doesn’t basic economics teach that when supply (in this case willing workers) exceeds demand (the number of available jobs), that wages are pushed down? Yet Michigan law fights this principle, artificially forcing wages to remain high when it is unwarranted.

I have to wonder what Michigan’s unemployment rate would be if our minimum wage was lower — or nonexistent. After all, a mandated minimum wage does no good if you don’t have a job.